The New EIN Application Process

The New EIN Application Process

There’s a new IRS regulation coming soon that affects many taxpayers! Starting May 13, only individuals with tax identification numbers will be allowed to request an Employer Identification Number (EIN) as the “responsible party” on the application. This new process is part of the security measures the IRS is adopting.  Their goal is to improve transparency of who is obtaining an EIN.

What is an EIN and Why Do I Need It?

An EIN is a nine-digit tax identification number.  It is used for tax filing and reporting purposes for entities.  You need an EIN if you’re creating any kind of taxable entity, including the following:

An EIN designates identification for an entity and not an individual, which means if you have multiple entities, each one needs its own EIN. Also, if the structure or owner of the entity changes, you might have to apply for a new EIN.

Who Can Apply for an EIN?

Going forward, an entity will be prohibited from using their own EIN to obtain additional EINs. Instead, an individual should be named as the responsible party and he or she must request the EIN.  Additionally, the individual must have either a Social Security number (SSN) or an individual taxpayer identification number (ITIN).

Generally, the responsible party is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. If more than one person meets that definition, the entity may decide which individual should be the responsible party. The Form SS-4 Instructions provide a detailed explanation of who should be the responsible party for various types of entities.

Although the applicant must now be an individual with a tax ID number, your hb&k advisor can still act as a third-party designee to complete the paper or online applications on your behalf.